Brazil, one of the largest economies in Latin America, is all set to infuse more than $20bn capital in its banking system in a bid to break free from stagflation.
As reported by The Financial Times, the country is expected to grow less than 1%, while the data next month may show the economy slipping further into recession in the first half of this year.
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To avoid the looming recession amid slowing growth, the Brazilian central bank has announced an array of measures to ease banks’ reserve requirements, and changed the risk calculation for some loans, injecting an estimated total of R$45bn ($20.2bn) into the economy.
The banks will be permitted to use up to half of their reserve requirements on term deposits to boost credit operations or to purchase loan portfolios from eligible financial organizations.
The apex bank further increased the number of institutions eligible under that program to 134 from 58 previously and adjusted minimal capital requirements for retail credit operations.
This recent move is being seen to "improve the distribution of liquidity in the economy" and was described as a way to unwind the so-called macro-prudential measures launched from 2010 onwards to rein in the country’s credit boom.
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